Why developing great new retail-based centers is a time-consuming process
Over the past five years, more than 160 million sq. ft of vacant retail space has been demolished. Construction of new retail real estate, meanwhile, has come to a near standstill due to increasing construction and financing costs.
The average vacancy rate in the United States has consistently been at the 4% level for the past year. The unemployment rate, meanwhile, is less than 4%, its lowest level in decades. Despite nagging inflation, people are out and spending money. Retailers are overwhelmingly seeking new locations and vying to stay put in the good spaces they currently inhabit. Openings far outpaced closings in 2023, and 2024 appears to be continuing that trend.
What’s an expanding retailer to do?
In March, it was my great honor to be named president of Cullinan Properties. During the course of my career in retail real estate, I had come to appreciate Cullinan as a developer with a distinct, focused, and meticulous game plan and an unparalleled track record spanning nearly four decades. Cullinan has been an outlier in our business, founded nearly 38 years ago by Diane Cullinan Oberhelman, who, through vision, grit, and execution, has thrived through countless obstacles, including multiple economic cycles.
One of the only women in a chief role in development at that time, Diane focused on the office real estate sector at the beginning, then realized the value of adding retail and became a mixed-use pioneer. Cullinan developed mixed-use before anyone even used the term “mixed-use.” She acquired a vacant Caterpillar property in East Peoria and collaborated with city officials to transform an 86-acre site into what is now a populated and thriving, retail-based district called the Levee District.
Cullinan’s operational formula is never derailed by problem periods in the industry, such as the one we are now experiencing. We maintain longstanding relationships with municipal officials in our markets, with whom we set out carefully articulated, long-term plans.
One such project now under development is RockRun Collection in the Chicagoland suburb of Joliet, Ill. More a burgeoning community and entertainment center than a real estate project, Cullinan has collaborated with the city of Joliet on RockRun, which will feature an upscale Hollywood Casino and include 500,000 sq. ft. of retail and restaurants and 200,000 sq. ft. of entertainment along with office/medical, hospitality, and multifamily housing.
In addition to the local municipality, Cullinan put in a tremendous amount of upfront legwork with state and federal officials to make sure we are creating a project that the community deserves and that also fits the needs of leading retail brands. With careful long-term planning, we have de-risked this project and positioned it to be the most impactful development, located directly in the heart and at the crossroads of America.
Consumer habits and living patterns have changed. People today are looking for more dynamic environments in which to live, work, play, and stay. Because of the scale of the project, we have the luxury to blend all these components together artfully. Its food-and-beverage component will range from fast food to white tablecloth. RockRun Collection will have a menu of entertainment options outside of the casino, and it will feature a plentiful array of unique and traditional retail to serve the immediate community and the 10 million-plus residents we will reach with our super regional draw.
Retailers want and need to expand. Today, there is more demand than supply, and speed to execution is critical. Cullinan’s strategic process, however, is not solely focused on speed. We stay nimble to ensure we’re meeting the needs of the market. We believe that years of planning and preparation must be invested in building top-level projects that top-level brands long to be part of. Ours is a careful, time-consuming, and detailed process.
I could not be more excited to be helping lead the Cullinan team at this time. We have best-in-class people and are looking ahead as we build on our unparalleled track-record to execute the vision of RockRun Collection and our many other innovative projects nationwide. As we have for nearly 40 years, our team will march forward together into this next chapter.